Marginal Revolution

Some Simple Economics of Mandated Benefits

Via MR commentator John Chilton, here is a link (JSTOR, but free pdf here) to the classic and excellent treatment by Lawrence Summers on mandated benefits.  My view is that the main case for mandated benefits is simply to note that public provision is often worse and that direct subsidy, such as a cash transfer, is not always feasible.

The case against is simple too.  Say that previously unprovided health insurance would have cost the employer 60 and would have been valued by the worker at 40.  You're imposing a tax of 20 on the employment relation.  In the short run firms will hire less labor and during a recession is an especially bad time to produce that effect. 

In the longer run, if the market is competitive, wages will fall by 20.  We're forcing relatively poor workers to consume more medical insurance, and more medical care, than they wish to, at the expense of their cash income.

Do not forget the excellent words of Ezra Klein:

Indeed, the main impact of health-care reform on health may be that if it could contain costs, we'd have money to spend on things that actually do make us healthier.

He means things other than health care in the narrow sense.  I don't know if Ezra opposes the mandates approach (compared to what?) but his quotation indicates a problem with it, even from the standpoint of health alone, much less considering the other pleasures of spending or saving cash.

Of course some of the people covered by the mandate would otherwise end up showing up at emergency rooms.  Treating them that way would get tacked on to my medical bills, one way or another.  With a mandate they are no longer my financial headache. 

With this new change, who's better off?  Me.  Who's worse off?  The previously uninsured poor person.

You might say: "We are covering more people, at a lower price, than we had thought possible."  That sounds like a kind of triumph.  But if you cut through to the actual analysis, your paternalism has to be a lot stronger than your egalitarianism for you to support this kind of measure.

Twitter search of the day

Employer mandate.

How many of you use this function?

Here's a search on Karl Malden and Ben Gordon (now a Piston).  Besides entering your own name, what are the best methods for getting quality information out of Twitter?  Is there a successful hybrid blog/Twitter format, where the blogger pairs with Twitter to produce a better aggregator than either could do alone?

Assorted links

1. Ezra Klein's new food column.

2. Washington Post markets in everything?  The paper has yet to respond, so do be aware there may be another side to this story. 

3. Why WalMart caved.

4. 1959.

5. The Kissing Experiment (2009).

6. The end of free banking in contemporary China.

7. California: The Haves and Have-Nots.

Kindle edition of *Create Your Own Economy*

Now ready for pre-order.  You get it July 9, the date of the book release.

When should one blog the obvious...?

Usually I try not to blog points which already have occurred to everyone, even if those points are true and important.  But today I will do so.

First, the idea of an employer mandate for health care is a tax on hiring labor in a time when, if anything, the hiring of labor should be subsidized.  On top of that is the proposal to tax health insurance benefits.  Keynesians especially should be upset about these developments, although I haven't heard many peeps.  Even if they favor this policy in the abstract, surely they are accustomed to the idea that the short run is very important, most of all for labor markets and aggregate demand.

Second, Joseph Stiglitz's idea that "the UN has a key role to play in "reforming the global financial and economic system"" is a bad idea.  It is a very bad idea.  We're past the point where "they can't do any worse than we did" is a good or usable argument.  Has the Public Choice revolution been such an unpalatable pill to digest?

On the brighter side, I did not agree with but enjoyed this comment from thehova (citing Michael Powell):

"Wilco" is a five-letter word for the quiet slaughter of all that is elemental, passionate, and reverentially stupid about rock 'n' roll.

Markets in everything

Chessboxing has a convivial party atmosphere and is far more female friendly than a normal boxing crowd, with 40% of tickets purchased by ladies.

Here is more, with the subheader Swedish Chessboxing Sensation in London.  About a year ago, five or so people sent me links about chessboxing for "Markets in Everything."  I didn't think it was weird enough to merit inclusion in the series.  But now, with the addition of "Swedish" and "ladies" to the mix (or is it the "convivial party atmosphere"?), I think it is weird enough.  Here is Wikipedia on chessboxing.